US: Mondelez Western revamp to fund emerging market growth

Mondelez International is to close more facilities in Europe and shake up its supply chain in North America to pay for expansion in emerging markets.

The global snacks group, which is shutting sites in Austria and Spain, hinted today (29 May) it would close more in Europe as part of plans to boost margins, which it says will fund its growth in faster-growing markets.

The Cadbury and Oreo owner is also looking to "reinvent" its supply chain in North America. It also wants to introduce new, more modern production lines and bring back output from co-manufacturers.

Chairman and CEO Irene Rosenfeld told analysts at the Citi 2013 Global Consumer Conference the "race is on" to expand further in emerging markets.

Mondelez plans to spend more on marketing, add to its sales networks and enter new markets with new categories.

Rosenfeld said Mondelez had worked on "a lot of the lower hanging fruit" to improve margins in Europe but had identified more ways to boost margins.

"We still see more, but the biggest is in gross margin driven by our network. We are in talks with council and there are many steps that need to happen between now and then but we will move as quickly as possible," Rosenfeld said. "I'm not at liberty to disclose additional details but you can assume that closures will be part of the equation. We will provide updates as these progress." The company is in talks with unions, Mondelez said.

Mondelez also plans to streamline its supply chain in Europe and reduce overheads by integrating its operations in Central European countries into its "centralized category-led model". The company said it is targeting an improvement of 250 basis points in operating income margin from its business in Europe.

"In Europe we've made tremendous progress. We are targeting cost productivity and some of the biggest opportunities will come from streamlining the supply chain. Today we operate 72 factories across the European region but these run at dramatically different levels of efficiencies. Our first priority is to bring that level up ... so we will upgrade older production lines."

Mondelez plans to increase its investment in emerging markets by around US$100m this year, $200m next year and up to $300m in 2015.

Click here for further comment from Rosenfeld on Mondelez's plans for China.

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